Mixing the carrots with the sticks: third party punishment and reward

While the opportunity to punish selfish and reward generous behavior coexist in many instances in daily life, in most laboratory studies, the demand for punishment and reward are studied separately from one another. This paper presents the results from an experiment measuring the demand for reward and punishment by ‘unaffected’ third parties, separately and jointly. We find that the demand for costly punishment is substantially lower when individuals are also given the ability to reward. Similarly, the demand for costly reward is lower when individuals can also punish. The evidence indicates the reason for this is that costly punishment and reward are not only used to alter the material payoff of others as assumed by recent economic models, but also as a signal of disapproval and approval of others’ actions, respectively. When the opportunity exists, subjects often choose to withhold reward as a form of costless punishment, and to withhold punishment as a form of costless reward. We conclude that restricting the available options to punishing (rewarding) only, may lead to an increase in the demand for costly punishment (reward).     

Growth and conflict in the developing world: Neo-liberal narratives and social-economy alternatives

The last quarter of the 20th century saw an increase in violent conflicts across the globe. With connections between growth, poverty and conflict increasingly difficult to ignore, research has begun examining economic dimensions of conflict. This paper reviews and critiques this new research, much of it conducted by the World Bank. The research argues that war results from poverty, and poverty from misguided economic policies, so that reducing conflict requires redoubling efforts to promote growth via neo-liberal reforms. I criticize the conceptual underpinnings of this argument, including its overemphasis on individual incentives and its claim that social and economic injustices do not contribute to violent conflicts. Instead I argue that social economics provides valuable alternative perspectives on conflict that take seriously its social dimensions, especially problems of economic justice and the common good.     

Armington elasticities in intermediate inputs trade: a problem in using multilateral trade data

Abstract.  In this paper we find that the estimates of Armington elasticities (the elasticity of substitution between groups of products identified by country of origin) obtained from multilateral trade data can differ from those obtained from bilateral trade data. In particular, the former tends to be higher than the latter when trade consists largely of intermediate inputs. Given that the variety of intermediate inputs traded across borders is increasing rapidly and that the effect of this increase is not adequately captured in multilateral trade data, the evidence shows that the employment of multilateral trade data to estimate Armington elasticities needs caution. JEL classification: F14, C51     

Investment in Eastern Europe: The role of multilateral organisations

Director and Chief Economist, Central and Eastern Europe, Asia and Latin America, European Investment Bank.     

Food for a growing world population

This report describes summarily the set-up and main conclusions of the project “Food for a doubling world population”. It has to be seen as a preview-rather than as a summary-of the final report, as the model is not discussed explicitly in the present paper. The final report on the study-containing a detailed presentation of aims, methods and results—will appear under the title “MOIRA—A Model of International Relations in Agriculture”, North-Holland Publishing Company, Amsterdam, in the course of 1977. Besides the present authors, R. Brolsma, J. Bruinsma, P. Buringh, G.J. Staring, M. van der Vlis and C.T. de Wit had an active part in the multi-disciplinary project.     

Bank ownership of multilateral trading facilities and implications for historical exchanges: An industrial economics approach

The aim of this paper is to address bank ownership in Multilateral Trading Facilities (MTFs) and its implications for historical exchanges. We propose an oligopoly model with network effects to account for an exchange industry that consists of two MTFs and an historical exchange. Based on the observation that banks are both owners and clients of MTFs, we examine banks' incentive to influence the pricing policy of MTFs. We show that when brokerage and trading activities are particularly important for banks' revenue relative to their profit as MTF operators, certain market outcomes may emerge whereby both MTFs include banks' interest as clients in their objective function. We also demonstrate that accounting for banks' interest in MTFs' objective function acts as a competitive device that reduces the price and the profitability of the historical exchange.     

War and peace: Third-party intervention in conflict

This paper develops a simple sequential-move game to characterize the endogeneity of third-party intervention in conflict. We show how a third party's “intervention technology” interacts with the canonical “conflict technologies” of two rival parties in affecting the sub-game perfect Nash equilibrium outcome. From the perspective of deterrence strategy, we find that it is more costly for a third party to support an ally to deter a challenger from attacking (i.e., to maintain peace or acquiescence), as compared to the alternative case when the third party supports the ally to gain a disputed territory by attacking (i.e., to create war), ceteris paribus. However, an optimally intervening third party can be either “peace-making”, “peace-breaking”, or neither depending on the characteristics of the conflict and the stakes the third party holds with each of the rival parties.     

Bilateral Agreements in a MultiFirm Industry: Technology Transfer and Horizontal Merger

The paper studies the profitability of technology transfer and horizontal merger between two asymmetric firms in a multifirm Cournot oligopoly. If there is only one technologically advanced firm and one or many technologically backward firm(s), a profitable technology deal between two asymmetric firms exists if and only if the collaborating firms are close in terms of their initial technology levels. With more than one advanced firm such a technology deal is always profitable. Contrary to that, a profitable bilateral horizontal merger occurs if and only if the gap of technologies between the two partners is larger than a critical level. The paper also studies the relative profitability of these two bilateral arrangements.     

Proposal power and majority rule in multilateral bargaining with costly recognition

This paper studies a sequential bargaining model in which agents expend efforts to be the proposer. In equilibrium, agents’ effort choices are influenced by the prize and cost effects. The (endogenous) prize is the difference between the residual surplus an agent obtains when he is the proposer and the payment he expects to receive when he is not. Main results include: (1) under the unanimity voting rule, two agents with equal marginal costs propose with equal probabilities, regardless of their time preferences; (2) under a nonunanimity rule, however, the more patient agent proposes with a greater probability; (3) while, under the unanimity rule, the social cost decreases in group heterogeneity, it can increase under a nonunanimity rule; and (4) when agents are identical, the unanimity rule is socially optimal.     

International migration and real wages: a resolution note

The authors examine the impact of international labor migration on wages in country of origin. Two types of emigration are distinguished: bundled emigration, which can result in a reduction of real wages; and pure labor emigration, which results in an increase in real wages.     

Infinite desires in a finite world: Scarcity and its socio-economic implications

Natural resource scarcity has been making a resurgence as a dominant theme in recent economic writings. Most of the papers on this subject, however, have been narrow in their scope— discussing the issue mainly from a specific viewpoint or ideological stand. This paper attempts to give a balanced treatment to three economic positions (the traditionalist, the revisionist, and the unorthodox economist) taken toward natural resource scarcity. As such, the main objective of the paper is to present and analyze the basic arguments that have been advanced by the proponents of these three positions. It is the author's intent that this approach will help clarify the main factors that have been the source of disagreements among economists over the probable causes and ramifications of societal problems emanating from scarcity and in so doing provide a clearer perspective for prudent action.     

Infinite desires in a finite world: Scarcity and its socio-economic implications

Natural resource scarcity has been making a resurgence as a dominant theme in recent economic writings. Most of the papers on this subject, however, have been narrow in their scope— discussing the issue mainly from a specific viewpoint or ideological stand. This paper attempts to give a balanced treatment to three economic positions (the traditionalist, the revisionist, and the unorthodox economist) taken toward natural resource scarcity. As such, the main objective of the paper is to present and analyze the basic arguments that have been advanced by the proponents of these three positions. It is the author's intent that this approach will help clarify the main factors that have been the source of disagreements among economists over the probable causes and ramifications of societal problems emanating from scarcity and in so doing provide a clearer perspective for prudent action.     

Seeds of distrust: conflict in Uganda

We study the effect of civil conflict on social capital, focusing on Uganda’s experience during the last decade. Using individual and county-level data, we document large causal effects on trust and ethnic identity of an exogenous outburst of ethnic conflicts in 2002–2005. We exploit two waves of survey data from Afrobarometer (Round 4 Afrobarometer Survey in Uganda, 2000, 2008), including information on socioeconomic characteristics at the individual level, and geo-referenced measures of fighting events from ACLED. Our identification strategy exploits variations in the both the spatial and ethnic intensity of fighting. We find that more intense fighting decreases generalized trust and increases ethnic identity. The effects are quantitatively large and robust to a number of control variables, alternative measures of violence, and different statistical techniques involving ethnic and spatial fixed effects and instrumental variables. Controlling for the intensity of violence during the conflict, we also document that post-conflict economic recovery is slower in ethnically fractionalized counties. Our findings are consistent with the existence of a self-reinforcing process between conflicts and ethnic cleavages.     

The prospects for the social economy in a changing world

Even if the 'social economy' has traditionally been marginalized and a subordinated form of production within capitalist societies, the economic, social, territorial and environmental problems of the present times have tended to make it a strategic instrument. This is not only because of its qualities as an economic and management instrument, but also because it is an expression of a dynamic and creative civil society. The aim of this paper is to show the potential of the social economy, the way it has been encapsulated during the postwar period and the conditions that now favour its full development. In the face of new challenges, the efficiency criterion, hitherto used to assess alternative forms of production, is shown to be insufficient. Some complementary criteria are proposed that fit in better with the new path society must follow if fundamental values have to be satisfied. Starting from these criteria and relating them to management in fields of growing social importance, a new insight into the advantages of the social economy over the market and public sectors can be obtained. Stimulated by such challenges, and connected to the new social movements, a new social economy is emerging with significant potential and a strategic role in managing society. But this development is not without serious problems, and objective and subjective conditions need first to be fulfilled.     

Bilateral monopoly on a market for an intermediate good

In this paper we analyze a procedure through which price and quantity could be determined on a bilateral monopoly market for an intermediate good. The proposed solution concept is of a non-cooperative Nash equilibrium type. A dynamic process in which the bilateral monopolists repeatedly announce prices and quantities is studied. It is shown that, under particular assumptions, this process must converge to the proposed equilibrium solution. Finally, our solution concept leads to the competitive equilibrium if both sides of the market are ‘fractionated’ into a large number of ‘small’ buyers and ‘small’ sellers.     

Government industrial policy for a healthy world economy

The Japanese concept of “industrial policy” is the subject of this presentation. The central role of the Ministry of International Trade and Industry in the formulation of industrial policy for Japan over the past 35 years is reviewed. Several strategic phases are identified: 1945–1952, reconstruction of the economy; 1952–1960, comparative advantage strategy in capital-intensive industries; 1960–1973, transition to an open economy; 1973 to present, positive support policy for promising industries, e.g., subsidies for high-tech sectors and adjustive policy for declining industries (e.g., disposing of excess capacity in the textile sector). The advantages of National industrial policies for the world economy are indicated.     

Adaptive theorizing in a maladaptive world

The Santa Fe Institute’s economics program has nurtured some of the discipline’s most highly innovative forml theorizing and interdisciplinary brainstorming since its inception in the late 1980s. This proceedings volume provides the occasion for a review of ten-year’s progress by researchers associated with the Institute. The initial programmatic proposals of the first volume have indeed ben fleshed out with a range of models incorporating bounded rationality, complex dynamics, genuine social interaction, open-ended evolution, and a hint at historical contingency. Some of the achievements and limitations of these approaches, both formal and otherwise, are discussed in this essay